ESG Research & Integration in the Investment Process

//ESG Research & Integration in the Investment Process
ESG Research & Integration in the Investment Process 2017-10-12T06:45:20+00:00

Environmental, social and governance (ESG) research is an integral component of securities analysis at Walden. Our in-house team conducts primary and secondary research to evaluate ESG performance. Their findings are integrated into our stock research.

When reviewing a company for potential investment, Walden’s ESG analysts begin by developing an understanding of the company’s core products and services. This informs and prioritizes further research of material strengths or concerns in the four areas of our analytical framework: environmental performance, workplace practices, community impact, and corporate governance. We have over forty years of experience weighing the trade-offs between investing in innovative or best-in-class companies (“positive screening”) and ruling out poor performers (“negative screening”) for client portfolios. 

(See also how shareholder engagement and public policy advocacy are key strategies in meeting client objectives.) 

Walden’s Comprehensive Screening Guidelines

Most of our clients employ our comprehensive set of guidelines. In selecting stocks, Walden favors investment in companies we deem to have relatively strong ESG records and seeks to avoid those with inferior ESG performance relative to peers. After investing in a company, Walden may also choose to pursue shareholder advocacy on behalf of clients to encourage stronger corporate responsibility and accountability .

Product & Services              

We generally favor companies offering safe, high quality products and services that provide societal or environmental benefits. We avoid companies that derive significant revenue from the manufacture of weapons systems or hand guns, tobacco products and alcoholic beverages, or from gaming activities. We also seek to avoid companies in operating nuclear power plants or that have other significant involvement in the nuclear power fuel cycle.

Environmental Performance

We generally favor above average companies with respect to energy and natural resource conservation, and reductions in the volume or toxicity of emissions and waste. We also favor companies that proactively address major environmental challenges, such as climate change or water scarcity. 

Workplace Policies

We favor companies with strong policies and programs that encourage workplace diversity, equal employment opportunity and work-life balance; respect workers’ right to organize, and enforce high labor standards throughout their supply chains. We avoid companies with substandard performance in the hiring and promotion of women and minorities, or have a pattern of violating fair labor standards or health and safety regulations.

Community Engagement

We favor companies that have formal structures for constructive engagement and positive relationships with local, indigenous and underserved communities. We also favor companies with strong policies and practices that uphold international human rights standards. We avoid companies believed to have significant complicity in serious violations of human rights. We also avoid companies that are unresponsive to local community concerns on key issues such as environmental impacts, facility siting, employment, or addressing the needs of disadvantaged populations.

Corporate Governance
We favor companies with governance structures and practices that foster executive and board-level commitment to high standards of business ethics, independent decision-making and accountability of board members, and an environment of responsiveness and accountability to shareholders and other key stakeholders.